With US$500 billion flowing out of the active fund management sector over the past 12 months, Citi’s Robert Buckland says there is a “profound shift” towards passive investment under way.
Speaking in Sydney this week, Citi global equity strategist Robert Buckland said US$500 billion ($620 billion) is flowing out of active strategies and into passively managed products on a 12-month rolling basis.
This "profound shift" towards passive investment is one of the reasons the current bull market feels "miserable", Mr Buckland said.
Other odd things about the eight-year-old bull market include the lack of capex spending and the apparent absence of volatility, he said.
The phenomenon of investors piling into passive investment strategies is most notable in the US, with Asia and Australia less affected, Mr Buckland said.
"In the US there's run on the active fund management industry of enormous proportions," he said – adding Vanguard is taking on US$1 billion a day in new money.
Citi's clients, who tend to be more active than passive in their approach, are under enormous pressure in the US, he said.
"It's less of an issue in Australia, and less of an issue in Asia. It's a middling issue in Europe," Mr Buckland said.
"The dispersion is relatively wide, which would indicate there are opportunities for active managers.
"But it's particularly hard for them to capture those opportunities in the US. The onslaught from passive management have been particularly aggressive.
"That's another reason why it feels a lot more bearish than a bull market ought to. Because you've got these structural trends going on in the way that money is run in our industry."